Are Insurance Policies Considered Assets in a Bankruptcy Case?
Filing for personal bankruptcy in South Florida means that you will need to identify all of your assets and debts for the bankruptcy court. Regardless of whether you are filing for a liquidation bankruptcy under Chapter 7 or a reorganization bankruptcy under Chapter 13, the bankruptcy court will need to receive various forms from you that document your property, including assets that are fully paid off as well as those for which you still owe debt. Failure to accurately list all assets in either type of bankruptcy proceeding can result in your case being dismissed. The best way to ensure that you have identified and properly classified all property is by working with a West Palm Beach bankruptcy lawyer on your case. Yet it is also important to have a sense of what you should expect as your case progresses.
You may be wondering about insurance policies and their proceeds. Are these considered assets that you need to declare as part of your bankruptcy case? In short, the answer is yes, but they are likely exempt. Consider the following information.
Exemptions for Insurance Policies and Annuities
The Florida Statutes provide a wide range of bankruptcy exemptions for debtors who are filing for bankruptcy in the West Palm Beach area. The exemptions include certain insurance policy proceeds, life insurance policy surrender values, and annuities.
Under the Florida Statutes, the proceeds from a life insurance policy that are paid out to a beneficiary are exempt for bankruptcy purposes. Likewise, if you have a life insurance policy with a cash surrender value, that is also exempt in your bankruptcy case. The Florida Statutes also exempt certain annuities (but not annuities from any lottery winnings).
An annuity, according to the IRS, is a “contract that requires regular payments for more than one full year to the person entitled to receive the payments.” Annuities are commonly purchased through insurance companies.
Importance of Insurance Policy and Annuity Exemptions
Why do the above exemptions matter? The answer will depend on the type of bankruptcy you are filing.
In a Chapter 7 bankruptcy, any property that is exempt will not have to be liquidated. Rather, the debtor can keep all exempt assets. In a Chapter 13 bankruptcy, exempt assets are not included in the total calculation for determining how much the debtor will have to repay over the course of their repayment plan.
While insurance proceeds or annuities may not ultimately come out to a substantial amount of money, they are often a critical source of funds for debtors who are struggling financially. If you have questions about whether your specific insurance policy or payout amounts, or annuities, are exempt, you should seek advice from a bankruptcy attorney.
Contact Our West Palm Beach Bankruptcy Lawyers Today
For any questions considering property in your bankruptcy case, including exemptions set forth under the Florida Statutes, you should seek advice from a lawyer who can help you. An experienced West Palm Beach bankruptcy attorney at Kelley Kaplan & Eller can speak with you today about your bankruptcy plans, and we can begin working with you on the details of your bankruptcy filing. Contact our firm for more information.
Sources:
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0200-0299/0222/Sections/0222.13.html
leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/0222ContentsIndex.html
irs.gov/retirement-plans/annuities-a-brief-description
